How to Finance a Business: Top Tips from Hatch

If you’re wondering how to finance a business, you could do worse than to follow the example of Anjali and Jon. She’s an experienced business woman, he’s a skilled inventor, and between them they’re launching their latest venture; Hatch.

Needless to say, we’ve got a good, old-fashioned business story for you this week. Born of necessity (and a little creative thinking), Hatch’s first product is a pet carrier. But not just any pet carrier. Anjali and Jon regularly travel with their cats. Both have cracked opened carriers in the hopes of putting a comforting hand inside only to have a slippery feline force its way out. Hatch’s pet carrier is designed to put a stop to that. With a patented hatch that allows a human hand into the carrier (but keeps your favorite moggy safely inside), this product is set to revolutionize long journeys and trips to the vets.

“Our initial start-up costs were self-funded,” Anjali filled us in when we caught up with her. “But we quickly realized that manufacturing such a high-end product in bulk would be expensive. We considered many funding options, but the downsides — i.e., the risks of self-funding and the loss of control that comes with outside funding — steered us away from them this early in the game.”

So why did this inventive pair opt for crowdfunding in the end? “Initially, it was a low-risk funding option, but we realized that crowdfunding also offers a lot of benefits besides capital. These were important factors that could help make our business a success,” Anjali explains, unintentionally echoing Narek’s latest article. “For example, feedback from our backers (and non-backers) has provided valuable market research. Exposure to target audiences has brought us potential customers, as well as retail and supply chain partners. And, of course, we’ve been able to test pricing and collect pre-orders for a product that hasn’t even been created past the prototype stage yet. Which brings us to the most obvious advantage of all, getting validation with minimal financial risk,” She smiles. “Can you tell we’re fans of crowdfunding?”

We certainly can. With their Kickstarter campaign already passed over their target, Hatch are certainly showing us how to finance a business. But what’s the biggest challenge their alternative approach has thrown at them? “Not having a pre-established network or crowd rallied around our cause,” Anjali answers without hesitation. “Neither of our personal and professional networks can be scoffed at — they’ve provided significant support actually — but we hadn’t realized the importance of a crowd who believes in the concept as well as us. It’s also been quite hard to tell which advertising channel worked best for us.” She adds.

It’s an interesting insight, and not something we’ve heard from other campaigners. “When we asked our backer’s where they’d heard about our project, many couldn’t remember,” Anjali explained. “We spent a lot of money on Twitter and Facebook, and it would have been helpful to track conversions.”

One way they could have overcome this problem would have been to target specific audiences on each channel. It might have at least provided some insight had the Facebook ads been pointing at one age bracket and Twitter targeted to a specific location. But that’s a solution they can use to good effect on their next campaign. Assuming we’re likely to see them again? “No promises.” Anjali smiles, “But I can definitely see the benefits of launching our next product on Kickstarter.”

Personally, we think we’ll be seeing more of these guys. After all, they’ve proven that crowdfunding is a fantastic way to finance a business.